LouisianaSenateFinanceCommittee

FiscalYear2018-2019Budget

LSUHospitalSystemandGraduateMedicalEducation

April2018

Sen.JohnA.Alario,PresidentSen.EricLaFleur,Chairman

TheHistoryoftheLSUHospitalSystem

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LSUassumedresponsibilityfortheoperationofthestate’ssafetynetacutecarehospitalsystemin1997,withtheenactmentofR.S.17:1519,etseq.Thesehospitalsalsoservedasthemainsitesofmedicaleducationinthestate.Priortotheprivatizations,theLSUHealthCareServicesDivisionwascomprisedofthesevenhospitals located in the southern part of the state and alignedwith the LSUHealth SciencesCenterinNewOrleans.TheLSUHealthSciencesCenterinShreveportwasresponsibleforthethreehospitalslocatedincentralandnorthernLouisiana.

TheLSUHospitalSystem

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LSUHospitalat

ShreveportE.A.ConwayMedicalCenter

HueyP.LongMedicalCenter

W.O.MossRegional

MedicalCenter

UniversityMedicalCenter

Wash.-St.Tamm.RegionalMedicalCenter

LeonardJ.ChabertMedicalCenter

MCLaNO/InterimLSU

Hospital

EarlK.LongMedicalCenter

OriginalLSU

HospitalSystem

LallieKempRegionalMedicalCenter

TheLSUHospitalSystem

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LallieKempRegionalMedicalCenter

SiteoftheCurrent

LSUHospital

TheLSUHospitalSystem

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UniversityHealth

Shreveport

UniversityHealthConway

RapidesRegionalMedicalCenter&ChristusSt.FrancisCabriniHospital

LakeCharlesMemorialHospital

UniversityHospital&Clinics

OurLadyof

Angels

LeonardJ.ChabertMedicalCenter

UniversityMedicalCenter

OurLadyoftheLake

Sitesofthe

LSUPublicPrivatePartnershipHospitals

orPartnerHospitals

ProvidingComparableServices

Howdid9ofthe10LSUHospitalscometobeprivatized?

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2/5/2010 LSU,OLOLandtheStateenterintothefirstCEAcreatingapublicprivatepartnershipgoverningthefutureofanLSUhospital–EarlK.LongMedicalCenter.

The U.S. Moving Ahead for Progress in the 21st Century Act of 2012 (Public Law 112-141) is enactedreducingtheDisasterFMAPfactorandtherebycreatinganearly$300millionshortfallinstatefundingintheMedicaidProgram.ThestatebeginscontemplatingthefutureoftheLSUHospitalsastheadministrationgrappleswithhowtoclosethedeficitintheMedicaidbudget.

7/6/2012

EarlK.LongMedicalCenterclosesandOLOLassumesitsinpatientandemergentcareandoperationoftheclinics.

4/15/2013

DHH announces a 24-percent cut in the total budget for the LSU Hospitals as part of the reductions inMedicaidclaimsanduncompensatedcarecostspaymentsinresponsetothereductionintheFMAP.

7/13/2012

DHH and LSUbegin a series of announcements of additional public private partnerships to operate LSUhospitalsinthefuture.

12/10/2012

LeonardJ.ChabertMedicalCenter,UniversityMedicalCenterandInterimLSUHospitaltransitiontoprivateoperation. W.O. Moss Regional Medical Center closes and Lake Charles Memorial Hospital assumes theinpatientandemergentcareandoperationoftheclinics.

6/24/2013

LSUHealth–ShreveportandE.A.ConwayMedicalCentertransitiontoprivateoperation.10/1/2013

Washington–St. Tammany Regional Medical Center/Bogalusa Medical Center transitions to privateoperation.

3/16/2014

HueyP.LongMedicalCenterclosesanditspartnerhospitalsassumetheinpatientandemergentcareandoperationoftheclinics.

7/1/2014

LSUPublicPrivatePartnershipHospitals

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TheLSUHospitalsPublicPrivatePartnershipsinvolveboththeLSUSystemandtheLouisianaDepartmentofHealth.

•  TheLSUBoardofSupervisorsisentrustedwiththeownershipandoperationofthesehospitalspursuanttoTitle17of theRevisedStatutes andoversees the cooperative endeavor agreements (CEAs)with thepartners now operating the former LSU hospitals or providing replacement services for the closedfacilities.

•  LDH’sMedicaidprogramcontainsthefinancingforthepartnerships.TheFY19Medicaidbudgetcurrentlycontainsnofundingforsupplementalpaymentstotheprivatepartnersthat will either operate or provide comparable services in the region of one of the former LSU hospitals.Approximately$1.1billionisbudgetedinthecurrentfiscalyearforpaymentstothepartnershiphospitals.Thepartnersarescheduledtomakeanestimated$168millioninleasepaymentstothestatenextfiscalyearaspartofthepartnershipagreements.IffundingintheMedicaidbudgetforpaymentstothepartnerhospitalsisnotrestoredandthepartnershipsdissolve,thenthestategeneralfundwillbeshortbythisamountastheleasepaymentswillnotbemade.The funding for the Public Private Partnerships also directly impacts the operations of the two HealthSciencesCentersastheycontractwiththepartnerhospitalstoprovidetheclinicalsettingsforstudentsandresidentsandtheirsupervisingfacultymembers.InsufficientfundingforthepartnershipshasadirectimpactontheabilityoftheHSCstofulfilltheiracademicmissionoftrainingthefuturemedicalprofessionalsforthisstate.

HospitalPrivatizationLegacyCosts

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The legacy costs associatedwith the privatization of six of the seven LSUHealth Care Services Divisionhospitals include expenses such as the administration of the remaining activities associated with theprivatizedhospitaloperations,legalfees,medicalrecordsstorage,propertymaintenance,riskmanagementpremiums,andretirees’groupinsurancepremiums.The oversight and maintenance responsibilities of the New Orleans-based properties were transferredfromHCSDtotheLSUHealthSciencesCenter–NewOrleansinFY16andthefundingtransferredinFY17.The LSU Health Sciences Center – Shreveport is responsible for the legacy costs associated with theprivatized hospitals inMonroe and Shreveport and the closed hospital in Alexandria,which include thecosts related to the remaining activities of the privatized hospital operations, medical records storage,propertymaintenance,riskmanagementpremiums,andretirees’healthandlifeinsurancepremiums.TheprojectedhospitallegacycostsforFY19total$50.5million:

•  $27.6millionfortheHealthCareServicesDivision;•  $6.2millionfortheHealthSciencesCenterinNewOrleans;and,•  $16.7millionfortheHealthSciencesCenterinShreveport.

LSUHealthCareServicesDivision

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HCSD’s FY19 budget is being reduced by a total of $19.7million ($13.6million inDSHpayments and $6.1million in supplementalpayments) tobalanceLallieKempRegionalMedicalCenter’sbudget to theamountbudgetedforsuchreimbursementsinSchedule09-306MedicalVendorPayments.

MeansofFinance FY16Actuals FY17Actuals FY18EOB(asof12/1/17)

FY19Recommended

DifferenceFY18toFY19

StateGeneralFund $36,106,297 $24,664,566 $24,427,906 $24,427,906 $0InteragencyTransfers $21,026,831 $17,788,112 $18,383,724 $3,969,790 ($14,413,934)FeesandSelf-generatedRevenues $7,359,632 $12,149,617 $15,472,658 $9,355,434 ($6,117,224)StatutoryDedications $0 $379,658 $0 $0 $0FederalFunds $4,443,953 $4,954,212 $4,800,336 $4,800,336 $0

Total $68,936,713 $59,936,165 $63,084,624 $42,553,466 ($20,531,158)

LSUHealthSciencesCenter–NewOrleans

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The HSC’s estimated portion of the across-the-board SGF reduction to Higher Education proposed in theExecutiveBudgetforFY19totals$2.6million.

AllStateGeneralFundfortheHigherEducationInstitutionshasbeenpooledtotheBoardofRegentsfordistributionaccordingtheHigherEducationFormula.Itisestimatedthat theHealthSciencesCenter’s shareof theSGF in theExecutiveBudget totals$73.2million; therebyproducinga totalestimatedbudgetof$136.3million for theHealthSciencesCenterforFY19.

MeansofFinance FY16Actuals FY17Actuals FY18EOB(asof12/1/17)

FY19Recommended

DifferenceFY18toFY19

StateGeneralFund $39,455,355 $74,536,768 $75,847,984 $0 ($75,847,984)InteragencyTransfers $0 $0 $0 $0 $0FeesandSelf-generatedRevenues $55,251,355 $58,910,443 $58,996,024 $58,996,024 $0StatutoryDedications $50,982,229 $16,816,796 $4,234,423 $4,116,350 ($118,073)FederalFunds $0 $0 $0 $0 $0

Total $145,688,939 $150,264,007 $139,078,431 $63,112,374 ($75,966,057)

LSUHealthSciencesCenter–Shreveport

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The HSC’s estimated portion of the across-the-board SGF reduction to Higher Education proposed in theExecutiveBudgetforFY19totals$2million.

AllStateGeneralFundfortheHigherEducationInstitutionshasbeenpooledtotheBoardofRegentsfordistributionaccordingtheHigherEducationFormula.Itisestimatedthat theHealthSciencesCenter’sshareof theSGF intheExecutiveBudget totals$56.2million; therebyproducingatotalestimatedbudgetof$84.9million for theHealthSciencesCenterforFY19.

MeansofFinance FY16Actuals FY17Actuals FY18EOB(asof12/1/17)

FY19Recommended

DifferenceFY18toFY19

StateGeneralFund $47,486,476 $57,211,833 $58,202,700 $0 ($58,202,700)InteragencyTransfers $0 $0 $0 $0 $0FeesandSelf-generatedRevenues $18,829,077 $21,109,079 $21,409,079 $21,409,079 $0StatutoryDedications $47,601,062 $7,529,265 $7,400,747 $7,329,332 ($71,415)FederalFunds $0 $0 $0 $0 $0

Total $113,916,615 $85,850,177 $87,012,526 $28,738,411 ($58,274,115)